Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Post Referendum Bounce

Commodities / Gold and Silver 2014 Dec 05, 2014 - 02:40 PM GMT

By: Alasdair_Macleod

Commodities

It turns out the Swiss referendum last weekend which sought to force the Swiss National Bank to maintain 20% gold reserves was a red herring so far as precious metal markets are concerned. It was fairly obvious before the referendum that no sensible trader would had bought gold in the expectation it would go through, so there would be few short-term sellers afterwards. Equally, it was so obvious to traders the referendum would fail that there may have been some short-sellers, or perhaps deferred buying waiting for the event to pass.


In early Far East trade on Monday the big players took the opportunity to test this by knocking the price to as low as $1142 immediately after the result was declared. This should have taken out all the stops on the way down. Instead it set up precious metals for the sharpest rally seen in years. Gold rose as much as $80 or 7% from that low during Monday's trading, and silver a remarkable $2.57, or 18%.

The extreme level of short positions held by money managers (mostly hedge funds) on Comex had already reduced slightly, according to the Commitment of Traders Report for the previous Tuesday (25th November). Furthermore, as well as swaps the spectacular reduction in open interest reflects contracts exchanged for physical (EFP). In this context EFP includes deals for forward settlement and no physical needs to be involved, so EFP represents contracts that have simply moved from the regulated Comex market into the unregulated hinterland.

The following charts for gold and silver respectively show how dramatic the decline in open interest has been.

Gold Price and Open Interest Chart

Silver Price and Open Interest Chart

As gold recovers, the backwardation in London, represented by the GOFO rate, has ameliorated to minus 0.17% yesterday, having been minus 0.5825% on Monday, and this is shown in the next chart from the LBMA.

GOFO Chart Feb - Dec 2014

This does not necessarily mean the shortage of physical bullion has been resolved, only that at over $1200, buyers of physical are not chasing prices so hard. This is confirmed by market action with the $1200 level initially acting as a level of supply until Wednesday morning UK time, after which it has become support with the price holding above it. It is also worth noting that the turmoil in markets was a wider phenomenon with the oil price recovering sharply on Monday as Brent rallied from $68 to$73, before drifting off back to $69 yesterday.

In other news, according to a report from Bloomberg, China is considering allowing entities other than licensed banks to import gold, to eliminate the premium in Shanghai over the London spot price. It is more likely that this move would be intended to gain a greater share of global gold flows to satisfy domestic demand. And last week the SGE delivered a further 53.56 tonnes into public hands, a rate which has been constant for the last ten weeks and is more than global mine production ex-China.
Next week

Monday. Japan: Economy Watchers Survey, M2 Money Supply. Eurozone: Sentix Indicator. UK: CBI Industrial Trends.
Tuesday. UK: Industrial Production, Manufacturing Production. US: IBD Consumer Optimism
Wednesday. Japan: Consumer Confidence. UK: Trade Balance. US: Budget Deficit.
Thursday. Japan: Key Machinery Orders. US: Import Prices, Initial Claims, Retail Sales, Business Inventories
Friday. Japan: Capacity Utilisation, Industrial Production. UK: Construction Output. Eurozone: Industrial Production. US: PPI, University of Michigan Sentiment.

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in